Bulacan State University

Graduate School

CASE STUDY: SAN MIGUEL CORPORATION

In Partial Fulfillment of the Requirements for the Subject

Decision Making and Business Policy Formulation

By

Lama Grace I. Caidoy

March 2019
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

San Miguel Corporation

 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

Vision

We are San Miguel.

Guided by a strong sense of social, environmental and economic responsibility, our businesses
will lead efforts to deliver on national goals, setting the pace of progress in the Philippines.

Mission

To provide goods and vital services well within the reach of every Filipino, making everyday life
a celebration.

Facts about San Miguel Corporation

 One of the Philippines’ largest and most diversified conglomerates, generating about
5.2%* of the country’s GDP.

 Its direct workforce is over 24,000 employees.

 It has more than 100 major facilities in the Philippines, Southeast Asia, China, Australia,
and New Zealand.

Eduardo "Danding" Murphy Cojuangco Jr. He is a Filipino

businessman and politician and has been the Chairman and
CEO of SMC since July 7, 1998.

Cojuangco was a close adviser and personal friend to former

Philippine president Ferdinand E. Marcos, which led his
estrangement from his cousin, Corazon Aquino, who, after
Marcos' ouster, succeeded him as president. He was a
member of the group nicknamed the "Rolex 12", a group of
12 men who were closest to Marcos and allegedly were his
enforcers of Martial Law.
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

History of SMC

Established in 1890, La Fabrica de Cerveza de San Miguel, Southeast Asia’s first brewery
produced and bottled what would eventually become one of the bestselling beers in the
region.

In 1889, a well-known Manila businessman, Enrique María Barretto de Ycaza y Esteban,

applied for a royal grant from Spain to establish a brewery in the Philippines. He was
awarded the grant for a period of twenty years. On September 29, 1890 it was declared
open for business.

San Miguel Brewery, Inc. (1913–1963)

By 1913, imported beer represented only 12% of the total consumption in the Philippines;
San Miguel held an 88% share of the industry. By 1914, San Miguel Beer was being
exported from its headquarters in Manila to Shanghai, Hong Kong and Guam.

San Miguel Corporation (1964–present)

In the 1970s, then Philippine President, Ferdinand Marcos imposed a tax on the production
of coconuts, a major Philippine cash crop, with the proceeds supposed to fund that
industry's development. It was alleged, however, that the money was funneled into United
Coconut Planters Bank, controlled by Eduardo Cojuangco Jr., which Cojuangco then used
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

much of the funds to help him purchase his controlling stake in San Miguel in 1983. The
controlling interest carried nine of SMC's 15 directors seats with it.

SMC encountered its first major competitor in the Philippine beer market in 1982 with the
entry of Asia Brewery, Inc.

About SMC
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

 Food
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

 Beverages

1. Beer

- San Mig Light, Red Horse Beer, Cerveza Negra, Gold Eagle Beer, San
Miguel Strong Ice, San Miguel Super Dry, San Miguel Premium All-Malt Beer,
San Miguel Flavored Beer, San Mig Zero, and its flagship brand, San Miguel Pale
Pilsen.

2. Hard Liquor

- Ginebra San Miguel Gin, GSM Blue Gin, Primera Light Brandy and
Vino Kulafu.

 Packaging

The San Miguel Yamamura Packaging Corporation provides a wide range of packaging
solutions to various industries including food, pharmaceutical, chemical, beverages, and
personal care across Asia-Pacific, Middle East, Africa and the United States. It is a major
player in the domestic packaging industry with market leadership in most of its product
formats. (Glass, Plastic, Metal, Flexibles, Molds, Paper, etc.)

 Properties

San Miguel Properties Inc. (SMPI) is presently engaged in commercial property

development, sale and leasing of real properties, management of strategic real estate
ventures and corporate real estate services.

Among its completed projects are Bel Aldea and Maravilla in Cavite, Wedgewoods in Sta.
Rosa, Laguna, and Makati Diamond Residences, Dover Hill, One Dover View, Two
Dover View and Emerald 88 in Metro Manila.
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

 Oil Refining and Marketing

Petron Corporation is the largest oil refining and marketing company in the Philippines
and is a leading player in the Malaysian market. We have a combined refining capacity of
nearly 270,000 barrels-per-day, fueling the lives of millions of Malaysians and Filipinos.

Here in the Philippines, they supply about a third of the country’s total fuel requirements
through the operation of our 180,000 barrel-per-day refinery in Bataan.

 Power and Energy

1. The Sual Power Plant is a 2x500 MW coal-fired power plant located in Sual, Pangasinan
on the Lingayen Gulf.
2. The Ilijan Power Plant sits on a 60-acre site at Arenas Point, Barangay Ilijan, Batangas
City
3. The 345 MW San Roque Hydroelectric Multipurpose Power Project in San Manuel,
Pangasinan. It utilizes the Agno River for power generation and irrigation and contributes
to flood control and water quality improvement for the surrounding region.
4. Greenfield Power Plants in Davao and Bataan

 Infrastructure
SLEX
Skyway Stage 1, 2, 3 & 4
STAR
NAIA-X
TPLEX
Boracay Airport
MRT-7
Bulacan Bulk Water
Manila North Harbour
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

 Other Businesses
Anchor Insurance Brokerage Corp.
ARCHEN Technologies
Bank of Commerce
SMC Shipping and Lighterage Corporation
SMC Retirement Funds Office
SMC Stock Transfer Corp.
SMITS, Inc. is one of the leading Information Technology (IT) companies in
the Philippines today and is responsible for managing the IT operations of the
country’s largest and most diversified conglomerate, San Miguel
Corporation.
ProSync
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

Problems Encountered by SMC

 In order to become one of the 10 largest food companies in Asia, SMC revenues and profits
should be dispersed around its various subsidiaries and acquisition.

 SMC had to borrow money to acquire businesses. The interest limited the net income. The
percentage increase was only 2%. Without the financial charges, net income would have
been up by 8%.

Alternative Courses of Action

1. SMC should try to increase the profit margins of products. This can be done through
Product development techniques, innovative methods and reducing the production cost and
improving the efficiency of production plants and such.

PROS: More revenues will be generated along with better operational profits. Innovative
products tend to attract a larger consumer market. Lower production cost.

CONS: Cost of Research and Development (R&D). Time required for conducting the
R&D. Time lost is opportunity lost.

2. To tap into the potential of all the acquired and joint-venture companies. Globalization
makes it imperative for companies to be more innovative, exact higher standards, cost-
reduction, and increased efficiency and effectiveness. These factors play a major role in
exploring the full potential of a market. Market penetration and Market development
techniques are useful in such cases. Polycentric Management Orientation should be utilized
for marketing efforts.

PROS: Profit Generation. Higher product standards.

CONS: Cost of marketing research is higher.

 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

3. Market segmentation and targeting strategies should be applied when it comes to

International markets. Example: Food products would sell more in the Indian Sub-
continent compare to beverage.

PROS: Products can be marketed more effectively depending on the targeted segment.

CONS: Cost of Research is higher.

Recommendations

 To become a global giant, SMC should strengthen their marketing efforts and segmentation
of market should be done more precisely.

 Polycentric marketing orientations should be utilized.

 Global market has divergent properties and a diversified customer base. Therefore, Product
innovation and cost reduction methods should be used.
 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

SWOT Analysis

 STRENGTHS

Asset leverage Effective communication

High R&D Innovation

Loyal customers Market share leadership

Strong management team Strong brand equity

Strong financial position Pricing

Reputation management

 WEAKNESSES

Management bench is not deep Lack of scale

 OPPORTUNITIES

Acquisitions Asset leverage

Innovation Product and services expansion

Emerging markets Expansion abroad

Takeovers

 THREATS

Competition Economic slowdown

Price wars Product substitution

External changes (government, politics, taxes, etc)

 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

Lower cost competitors or imports

Maturing categories, products, or services

 CASE STUDY: SAN MIGUEL CORPORATION
DECISION MAKING AND BUSINESS POLICY FORMULATION

Data from year 2017-2018